Nudge: Improving Decisions About Health, Wealth and Happiness

The idea of a ‘nudge’ in the behavioural-science sense of the word is more or less “a small tweak or intervention that impacts or guides behaviour without decreasing the amount of options”. An (American) example of ‘nudging’ is signing people up for a decent pension-plan by default (the 401K) instead of leaving it to themselves to go out and choose one. 

This idea was made famous back in 2008 by Thaler and Sunstein’s book ‘Nudge’. A recent prominently discussed application of nudging has been with regard to the UK government’s corona-strategy: at the start of the pandemic, they arguably relied more on nudging people towards (e.g.) washing their hands than considering going into a strict lockdown. This was done based on advice from their governmental Behavioural Insights Team, which is colloquially known as the ‘Nudge Unit’. 

An example of nudging which is described in the book and since implemented in The Netherlands is changing the organ-donation to an opt-out, instead of an opt-in

Examples of nudge

As mentioned, one of the primary characteristics of a ‘nudge’ (as compared to other policy measures) is that the person being nudged towards a certain action retains their freedom of choice. This is in line with the idea of ‘libertarian-paternalism’ which holds that it is legitimate of governmental and private institutions to steer or nudge people towards certain behaviour, as long as freedom of choice is kept intact, and it is this idea which is the central theme in this book. 

An example of nudging which is described in the book and since implemented in The Netherlands is changing the organ-donation to an opt-out, instead of an opt-in. This way, every inhabitant of The Netherlands donates their organs by default.

Another obvious example is retailers putting the items with higher profit-margins at eye-height and putting expensive snacks at the cash-register.

However, sometimes nudges get personal: late payers of road tax have been found to pay their due tax with higher likelihood when the road-tax reminder includes a photo of their own car in the letter.
And in India it has been found that workers are more likely to save their earned wage if it’s given in two installments per month instead of one, or if the salary-containing envelope has pictures of their children on it (which they’d have to rip up to get their money).  

Since unsubscribing requires effort, your subscription will be renewed before you know it

The efficacy of nudge

Nudging sometimes works because people are intrinsically lazy and will go for the option that offers the least resistance. By setting the (choice-architect’s) preferred option as default, like in the organ donation example, more people will stick to it because it requires effort to change your preference.

Another very effective example the book mentions is automatic renewal for newspaper subscriptions, or in the 2021 case, subscriptions for streaming services. For some, if not most of these services, you are required to enter your credit card details even when just signing up for a “free” trial. Since unsubscribing requires effort, your subscription will be renewed before you know it. 

The book touches on this particular example in its chapter on choice architecture to illustrate the tremendous power of default options. This seems to be one of the main downsides of nudges, and sometimes even a source of controversy.

Voting ballots have to list parties in some particular order. In Nudge, it is argued that this makes the ballots biased, since the candidate or party listed first gains about 3.5 percentage points in voting

Unconscious nudges in elections

It seems as if nudging is all around us. Whether we know about it or not, our decisions are almost always being influenced somehow. Even if you are opposed to using nudges, or regard it as common sense, you will be nudged, and sometimes unconsciously. 

Consider the example of voting, which is especially relevant with the Dutch elections coming up next week. Voting ballots have to list parties in some particular order. In Nudge, it is argued that this makes the ballots biased, since the candidate or party listed first gains about 3.5 percentage points in voting (Koppell and Steen, 2004). Generally in the Netherlands, the parties which are already represented in the Tweede Kamer are listed first, in the order of the amount of votes they got during the last election. 

Does this mean that these parties have an unfair advantage? Are the numerous new parties, who are trying to make a name for themselves, being disadvantaged this way? Maybe, but the result of Koppell and Steen has to be interpreted with some nuance, as the effect is smaller than 3.5 percentage points when the candidates or parties are well known. We would argue that parties like VVD, PVV and CDA are very well known, so the effect of ballot order might be negligible, except for the completely uninformed voter. There might still be some effect when voting for a particular party member, as the lijsttrekker (leading candidate) is always listed first. The candidates themselves can be less well known than the parties, and more voters will just vote for the leading candidate without giving it much thought. A personally randomised ballot may be completely neutral, but it won’t  make tallying the votes any easier.

Before reading this book, we would not have thought twice about the order of parties on a voting ballot. It seems useful to know when you are being nudged and when nudges are inevitable, however small they may be like in the case of voting. Surely there are many more examples of unconscious nudges, whether they have a positive or a negative influence on our decisions.

Is the book worth reading? - Martijn’s verdict
I do think Nudge is worth reading, as it mostly offers interesting examples of nudges and the philosophy behind it. If you are more familiar with behavioural economics however, you might already know about many examples, or they might not be that surprising to you. Yet, for most readers, there will definitely be new examples. After reading Nudge, you will be more aware of how your choices are influenced, and maybe more importantly, how we can influence the choices of others positively. Especially the latter is relevant to policy makers, as the optimal policy may not be that optimal when it is not understood or not supported by the choice architecture.

Is the book worth reading? - Xerxes’ verdict
No, one is likely already familiar with most of its ideas, since a lot of it has been incorporated in other popular behavioural economics books: one is likely already familiar with the gist of nudging and most of the cognitive biases (which serve as the basis of the argument for why people would need to be nudged towards better choices), and behavioural studies described in the book. The examples might still be interesting if one wants to learn about the differences between American and Dutch pension-planning and healthcare packages, for example.
It would, however, be worth reading if one hasn’t read other books in this approximate genre (popular science or behavioural economics or psychology). 

Sneak peak: Next week, Tom Korenwinder will write about his experience as a committee member for the LED 2021, which was held last month.